If you are unemployed, you can still file for Chapter 7 bankruptcy. Find out how your employment status might affect your ability to pass the means test.

There is no bar to filing for bankruptcy if you are unemployed. Like
all Chapter 7 bankruptcy filers, you'll have to pass the means test in
order to file for Chapter 7. The lower your income, the easier it is to
pass the means test, so being unemployed might make it easier for you to
qualify for Chapter 7 bankruptcy.

The Chapter 7 Means Test

The means test determines whether you qualify for Chapter 7
bankruptcy based upon your income during the six months before you file
bankruptcy. If you ‘re unemployed, there is a very good chance that you
qualify for Chapter 7 bankruptcy based upon your reduced income.

The means test looks at your average income over the six months
before filing and if your income is below the median (the average income
for a family of the same size in your state), you will qualify to file
under Chapter 7. If you’ve been receiving unemployment, your income is
probably significantly less than it was when you were employed, and that
increases your chances of qualifying for a Chapter 7 bankruptcy.

If your average income over the previous six months is over the
median, you may still qualify for a Chapter 7. The means test allows you
to indicate whether special circumstances apply that would allow you to
qualify. Indicating that you recently lost your employment may be
sufficient to prove that you do not have the money with which to repay
your debts.

What Happens to Your Debts and Property in Chapter 7?

Chapter 7 bankruptcy means that your unsecured debts are wiped out.
Unsecured debts are those such as credit cards, medical debts, personal
loans, and utilities, for which you have not assigned any personal
property as collateral for the loan. In a Chapter 7, the only debts you
are responsible for are secured debts, such as your home or car, which
you choose to keep. If you surrender your car or home, those debts are
also discharged.

After suffering a loss of employment, Chapter 7 bankruptcy offers a
unique opportunity to get back on your feet. You can discharge your
unsecured debts, and if you can no longer afford your home or car, you
can surrender those items and discharge the debt in your bankruptcy as
well.